When inventory valuation is based on an appropriately established and effective standard cost system:
A)cumulative variances are recognized.
B)a significant unfavorable net variance may be reported as an expense of the current period.
C)an insignificant favorable net variance may be reported as an expense of the current period.
D)the explanatory notes to the financial statements will explain the disposition of the net variance.

Question

Quizplus · Accepted Answer

A significant unfavorable net variance is typically reported as an expense of the current period because it reflects the difference between the standard cost and the actual cost, indicating higher costs than anticipated.

When Inventory Valuation Is Based on an Appropriately Established and Effective